§ 6.24 p.m.
§ The Joint Parliamentary Secretary to the Ministry of Housing and Local Government (Mr. James MacColl)
I beg to move,That the Housing Corporation Advances (Increase of Limit) Order, 1969, a draft of which was laid before this House on 3rd March, be approved.The purpose of this Order is to enable the Minister of Housing and Local Government with the Secretary of State for Scotland and the Secretary of State for Wales to make a further advance of up to £25 million to the Housing Corporation for it to lend to housing societies.
The Corporation began, when it was founded in 1964, with £50 million for this purpose. The Act under which it was established provided the first £50 million, but it also enabled the sum to be enlarged by Order or series of Orders up to another £50 million, making £100 million in all. There is, therefore, room for another Order or Orders to be introduced allowing for up to the last £25 million in future, if this Order is approved.
As the House knows, the Housing Corporation was set up to sponsor, advise and lend money to cost-rent and co-ownership housing societies. These types of society differ from the old-fashioned traditional housing associations, like the 1686 Peabody Trust, which were non-profit making, providing particularly to meet the needs of people who could not afford to pay a full rent or who did not want the burdens of owner-occupation. The purpose of cost-rent societies is to provide accommodation of a good quality, usually new accommodation, for people who can afford to pay an economic rent for their requirements but who, either because of the nature of their jobs or for other reasons, do not want to venture into owner-occupation.
A co-ownership society is an organisation which gets people together to share in the costs of providing houses for people who occupy them as co-owners. This type of society has certain advantages over cost-rent schemes because under the Housing Subsidies Act, 1967, which started option mortgages, a special provision was made for the co-owner to be regarded as an owner for the purpose of the option mortgage scheme, if that were the will of the majority of members of the society.
Under the Housing Act, 1961 there had been established a fund of £25 million to be given direct to cost-rent or co-ownership societies and that sum was quickly allocated. Under the 1964 Act, the money provided was advanced with the idea that the Housing Corporation would not lend the whole cost of schemes but that, in the ordinary way, building societies or similar financial institutions would lend two-thirds of the capital, with the remaining one-third coming from the Corporation on second mortgages.
Schemes of this type are not intended to be charitable or subsidised. It is a straightforward meeting of a demand which is presumed to be in existence, and the result is the production of property to be let at rents which people can pay. Much thought and research goes into the question how the property should be laid out, which sizes of houses there should be in the various schemes and how they should be designed. This research is vital because if a scheme does not produce sufficient money to enable the loans to be repaid, such a scheme is bound to be essentially unsound. If a scheme is sound, the building societies can be expected to back it and if, with their financial acumen, they do back it, then that in itself is a corroboration of the soundness of the scheme.
1687 It was hoped that, as a result of the schemes which were permitted under the 1961 Act, private investors would see that this was a promising sphere of activity. Thus, an essential part of the set-up is that the Corporation should advance only one-third of the cost. This is, as I pointed out, meant mainly to be a sphere for private investment. The Corporation is designed to encourage, to advise and to offer the necessary know-how to those concerned and to make advances of about one-third of the cost.
The total since the Act came into operation is 602 schemes providing 24,506 units at an estimated cost of about £108,732,000. This has meant that the Corporation has committed itself to advance approximately £40 million out of £50 million allowed under the Act. Unless the limit, therefore, is now, with the will of the House, increased, it might be that the Corporation's commitments would go beyond the resources which Parliament has allowed to the Corporation.
I think that the way in which the Corporation has managed to advance these schemes and to get them going, and has committed its resources in this way, while having regard to reasonable business soundness in doing so, indicates that its work has been successful, that the Corporation has encouraged and helped in a real need, and that it ought to obtain the support of the House in this way.
§ 6.31 p.m.
§ Mr. Graham Page (Crosby)
I find that confusion is caused by the terms used in connection with housing societies and housing associations. The Joint Parliamentary Secretary partially explained them, but it is probably worth putting on record at the beginning what we mean by these various expressions—Housing Corporation, housing societies, housing associations, housing trusts, and even building societies—so that we may appreciate clearly what we are talking about in connection with this Order, namely, the Housing Corporation and the housing societies which the Housing Corporation finances.
I must declare an interest as a member of the committees of management of several housing societies and as a director of a building society, but I declare the 1688 interest very deliberately, because I shall be drawing on my own experience, and I do not wish the Joint Parliamentary Secretary or the House or the Minister to think that any of my complaints, which I shall have to make against the Minister, have been put in my mouth by the Housing Corporation. I am drawing on my own experience.
This Order deals, then, with the Housing Corporation and the money which the Housing Corporation will be entitled to borrow from the Treasury and with that money, to finance housing societies. As the joint Parliamentary Secretary said, the Housing Corporation finances the projects of the housing societies up to one-third of the capital value of those projects, and the remaining two-thirds comes from the building societies. The Joint Parliamentary Secretary said "or from other financial sources", but I know of no others which have supported the scheme so far, and so it is the building societies to which the housing societies look for two-thirds of the cost of their projects. With that aid from the Housing Corporation and the building societies, the housing societies provide homes to let at cost. They are able to do that by reason of the voluntary services of those who form the societies, direct them and manage them.
As the Joint Parliamentary Secretary briefly indicated, housing societies are of two different kinds, the cost-rent society which provides homes to let in the normal manner on short tenancies, and co-ownership societies providing homes to let on long leases—and if the tenant moves out of a co-ownership scheme, then he receives a part of the sale price; and his share in that, of course, increases with the length of time that he lives in that home. Those, then, are housing societies.
I want to make it quite clear that we are not discussing today the sort of society or association which catches the headlines, that which is financed from charitable funds and by local authorities and comes under the umbrella of the National Federation of Housing Societies. It is unfortunate, perhaps, that the Federation's name has "society" in it. It is the umbrella for housing asociations. Therefore, we are not talking about such organisations as Shelter, the Peabody Trust, which the Joint Parliamentary Secretary mentioned, the Mulberry Housing 1689 Trust, for which my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph) has become famous, or such trusts as the Notting Hill Trust and Kensington Housing Trust. Nor are we concerned, with this Order, with what I would call the 1961 housing associations, those which were assisted by the Housing Act, 1961, by an advance of £25 million from the Exchequer direct to housing associations. But I mention those because they were the pilot schemes for the Housing Corporation and its children, the housing societies, under the Housing Act, 1964, the credit for which, again, must go to my right hon. Friend the Member for Leeds, North-East.
The 1964 Act created the Housing Corporation and authorised it to receive from the Exchequer £50 million and to advance that to housing societies, and it authorised a further £50 million to be granted to it by Order, and this is the first Order made under the Act. The first £50 million went under the Act itself, and we are now asked to authorise a further £25 million of the remaining £50 million authorised by the Act.
When we were considering the £100 million advance to the Housing Corporation we had in mind at that time about 100,000 houses spread over a period of five years. Perhaps I should make it clear that I do not mean just separate houses, but units, or flats—or let me call them homes. We thought that 100,000 homes might be sponsored by the Housing Corporation over a period of five years by means of the use of £100 million.
When considering this first Order to increase the first use of money by the Corporation, we can see how the movement is progressing, we can examine the achievements of the Housing Corporation and of the housing societies which it has financed. In the first year—that was 1965–71 projects were approved, which consisted of 3,339 homes costing—I give the exact figure—£13,868,113, that is nearly £14 million. That was an encouraging start, particularly when one considers the nature of the bodies, the housing societies, which are carrying out the work, because housing societies normally consist of a number of professional and business men who give their management services voluntarily while, of course, receiving proper remuneration for 1690 any professional services or commercial services which they give to a housing society.
The architect, if he is a member of the committee of management and draws plans for its schemes, is, of course, paid for those services; the lawyer is paid for conveyancing work which he does for the society; the quantity surveyor for his services; and the accountant for auditing; and so on. I want to make it quite clear that although the management services are voluntary, the society can call on the professional services of those who form its committee.
Those professional and business men seek appropriate sites for development. They negotiate the purchase of the right site on which they want to develop, and they plan the development. It is important to appreciate this aspect when considering the Order, because if such men are frustrated by the Corporation, and the Corporation, in turn, is frustrated by the Minister, this movement will die.
The year 1966 was also encouraging. There were 145 projects sponsoring 5,685 homes at a cost of £24 million-odd. That was a doubling of the 1965 figures. The third year, 1967, was a bumper year. The Corporation approved 247 projects which would provide 10,532 homes at a cost of about £48 million. In that bumper year, two features accounted for the rise in the figures. The first was the availability of building society funds—there was no obstruction or restriction on the finances which the housing societies then required from the building societies. The second was the application of the mortgage option scheme to co-ownership societies, on the basis that the long leaseholder co-owner is, in fact, paying the mortgage interest.
This is, perhaps, the only sphere in which the mortgage option scheme has had any success at all. I admit readily that it has resulted in co-ownership schemes going ahead and, indeed, being preferred to cost-rent schemes. In some ways, that is a pity. The original intention was that the two types of scheme should go along in balance, but there will now be no more cost-rent schemes, because they are no longer economical. The whole future progress looks as though it will be based on co-ownership schemes.
1691 That 1967 trend continued for the first quarter of 1968, when 61 projects were approved to provide 2,555 homes at a cost of about £11½ million. But in May, 1968, there started a catastrophic drop. The way in which the Corporation suddenly seemed to be brought to a standstill was astonishing. The final figures for 1968 showed only 139 projects—fewer than the number in 1966, and 100 fewer than the number in 1967. Those projects would provide 4,950 homes—again, fewer than the number in 1966, and only half the number in 1967—and their cost would be £22¾ million.
We have the Minister, faced with this sudden drop in the Corporation's activities over the last ten months, asking for £25 million to be authorised as an advance to the Corporation. It is the duty of the Parliamentary Secretary to explain this phenomenal decrease in the Corporation's activity for the last ten months. If he will not explain it, I shall try to do so.
First, I want to know why the Minister has done nothing to arrest this drop in the figures, and to bring the figures back to the doubling-up trend which we saw over the first three years of the Corporation's life. It is not a doubling up now: it is a halving of those figures. Here we have the Corporation with the machinery to produce at least 20,000 houses a year. It is very economically run. It has a staff of 80 for the whole country, spread out amongst its several regions. That, incidentally, is less than the staff of any one of the eleven regions of the Land Commission. That shows how economically the Corporation is run for the work it produces.
But the Corporation has been ordered—I repeat, ordered—by the Treasury to restrict its activities to sponsoring only 5,000 houses a year over the next three years. An organisation with the machinery to produce 20,000 houses a year has been ordered by the Treasury to sponsor only 5,000 houses a year, for the next three years. In 1968 the Corporation sponsored twice that number. Is the Minister so frightened of having that crude surplus of a million houses in 1973 that he has to restrict the Corporation's activities?
§ Mr. R. F. H. Dobson (Bristol, North-East)
The hon. Gentleman is making a 1692 very interesting point, and I am listening carefully because I, too, have an interest in a housing society, which, perhaps, I ought to declare before going further Under what authority, precisely, did the Treasury stop the Corporation? Can he explain in which way the Treasury issued that direction?
§ Mr. Page
The Treasury has control of the money bags. It can control the rate of advance of the £50 million to start with, and of the £25 million which we are asked to authorise. What the House is doing is to authorise the advance of £25 million, if the Order is approved. What the House did in the Housing Act, 1964, was to authorise the advance of £50 million. But it is up to the Treasury, to the Government of the day, to decide how much shall be advanced from time to time. I understand the present position to be that the Corporation is to be restricted to the amount that will produce 5,000 houses a year over the next three years.
I am blaming the Minister, but I appreciate that he is not wholly to blame for the general policy of his Government. When that general policy put up interest rates last spring, it put up the average rent under housing societies by 10s. a week. I am speaking of houses costing, say, £4,000 to £5,000—the sort of unit which one expects housing societies to produce in order to provide what the Parliamentary Secretary called good quality accommodation for the middle income groups.
The present rise to an 8½ per cent. interest rate which building societies have been recommended to charge by the Building Societies Association will put up rents by 14s. a week. That means that in less than 12 months the unfortunate co-owners have to face an average increase of 24s. a week. It happens in this way. A housing society has one-third on loan from the Housing Corporation. The Housing Corporation has by Statute to charge ¼ per cent. more than the recommended Building Societies Association rate. Therefore the Housing Corporation has to charge its housing societies 8¾ per cent. on that one-third of the capital finance, an increase from the 7⅝ per cent. it was charging, up to 8¾ per cent. The housing society has the remaining two-thirds on loan from a building society, and the rate on that will go up to 8½ per cent.
1693 One may say that the owner-occupier has to stand that as well. But there is a distinction. The owner-occupier can arrange with his building society to pay the same instalment and to extend the repayment period. That option is not open to the co-ownership tenant; he has to face the increase in rent which is due to the increase in interest rates. As many of these schemes were planned and started when the rate of interest was 6 per cent., one can appreciate what a blow that will be to the co-owners.
The rise in interest rates has killed cost-rent schemes. I do not know of any part of the country in which a cost-rent scheme is going ahead on the level of rents which people can afford in the area. The great majority of societies have had to switch to co-ownership, and no new societies are being formed on a cost-rent basis. They are all being formed on a co-ownership basis. That is done in order to obtain the mortgage option, when the difficulties I have been talking about are not the same, the interest rates being 6½ per cent. to the building society and 6¾ per cent. to the Housing Corporation.
Having looked at the matter from the housing society's point of view and that of the co-owner who forms part of the society, I now look at it from the Housing Corporation's point of view. In future, the Housing Corporation will be lending at 8¾ per cent., but it is to be charged by the Treasury 9 per cent. It will operate at a loss. I can only assume that the Government are determined to let the whole movement die a slow death when they impose that sort of loss on it in its normal commercial operations.
Apparently, the Minister of Housing and Local Government, whose responsibility it is to see that the Housing Corporation operates efficiently, stands by and does nothing. If he is unable to interfere in these matters of high finance, if he is dictated to by the Treasury, he could at least show some interest in the operation of the Housing Corporation itself. For example, his Ministry has given a directive to the Corporation that Ministry approval is necessary for any project including units over £5,000. That may have been a good directive three or four years ago, but nowadays a flat of good quality may well cost £5,000—and quite a modest flat at that.
1694 I understand that the Corporation made representations to the Ministry that, if one is to be successful in transactions of this kind, there is some urgency in them from time to time. A housing society may be buying a site at auction, perhaps buying a good site for which there are several prospective purchasers, and it wants to nip in quickly to secure it. I gather that the Ministry have promised to let the Housing Corporation have a reply in 48 hours. They always have let the Corporation have a reply in 48 hours. It has been easy. The reply has always been, "No". Thus, the Corporation has been prevented from running a normal commercial transaction covering units over £5,000, a figure which must be regarded as reasonable, certainly in the South-East, for the provision of middle-class dwellings. That is one point in which the Minister might take a little interest and about which he might look into the workings of the Corporation.
The bulk of preliminary expenses falls upon the individual members of the committee of management. In a co-ownership scheme, as far as I can see, those expenses are not recoverable for some 40 years. A committee of management has a list of properties. It investigates them. If it is an efficient committee, it will want to find the best sites. Those investigations cost money. I know of societies in which many thousands of pounds have been put up in preliminary expenses, either advanced or guaranteed by the individual members of the committee.
That is no basis on which to secure and keep voluntary services. If a member of a committee of volunteers has to guarantee a bank account up to several thousand pounds, that sort of voluntary service will not be forthcoming. The result already is that small societies are having to merge with larger societies. Again, there is a loss of voluntary service, because, although many professional and business men are prepared to give their time to a small society, perhaps in their home district where they know of the society's needs, they are not prepared to become involved in the work of a large society owning hundreds and hundreds of units of accommodation. There is another matter into which the Minister might well inquire.
1695 Third, the money for a project is provided to a housing society by the Housing Corporation only on the advice of the district valuer. There have been cases—I know of some—in which the district valuer has taken a very long time to give advice. The result is that a housing society, having found a good site—if it is a good site there will be other purchasers after it—is unable to clinch the bargain because it is still waiting for the district valuer, perhaps over months, to advise the Housing Corporation upon the proper price. I do not blame the district valuers' offices. They are overburdened with work, particularly work resulting from legislation pushed through by this Government over the past two or three years. But it is a matter which should be looked into in relation to the workings of the Housing Corporation.
I fear that there are members of management committees of housing societies who will not wish to face the blame from their co-ownership tenants for the increases in rent which will have to be made as a result of the rise in interest rates. I believe that there may well be resignations from that cause. One may say that it would be cowardly to do so, but we must remember that they are volunteers, and not everyone is prepared to suffer blame when giving voluntary services.
To sum up, in my view the Housing Corporation is not receiving the consideration, encouragement and help in its ordinary work that it is entitled to expect from the Minister, and financially it is receiving not just discouragement from the Government but very nearly a death blow.
§ 7.0 p.m.
§ Mr. John Fraser (Norwood)
I suppose that until we reform our methods of declaring interest, speeches in the House will be like those of deposed Communist Party officials. Like my hon. Friend the Member for Bristol, North-East (Mr. Dobson) and the hon. Member for Crosby (Mr. Graham Page), I declare that I have an interest, as an adviser to a number of housing associations.
I am often slightly embarrassed by the hon. Member for Crosby because I often agree with something that he has said. It may seem as if there is an unholy conspiracy 1696 between us before the debate, but these things happen spontaneously.
I am disturbed that there has been a drop in the number of units approved by the Housing Corporation over the past year. I had not been struck by the drop until the latest figures were given by my hon. Friend the Joint Parliamentary Secretary. We should have an explanation for the drop, and I hope very much that we shall have a firm and unequivocal denial of the allegation of the hon. Member for Crosby that the Treasury is deliberately restricting the number of units approved by the Housing Corporation to 5,000 a year by one means or another.
I welcome the Order, which represents a milestone in the achievements of the Housing Corporation. The Housing Act, 1964 enabled it to borrow up to £100 million, and it has now got half way to that statutory target.
I am particularly interested in the development of institutions of co-ownership, which used to be known as cooperative housing, and I am glad that under the aegis of the Corporation they have flourished so well. Co-ownership, or co-operative housing, is a new concept which was virtually unknown 10 years ago. It enables tenants to own, control and plan their own houses, flats and estates.
Co-operative housing represents a spirit of self-reliance and co-operation inside the community and an end to the traditional conflict between landlord and tenant which is present whether they be private tenant and private landlord or even council tenant and council landlord. This kind of co-ownership housing represents a resolution of that conflict, and I very much welcome it.
Anyone looking through the Reports of the Housing Corporation cannot but be impressed by the quality and standard of the estates which have been developed with loans from it. Nevertheless, there are a number of matters of concern to me, apart from those raised by the hon. Member for Crosby with which I agree.
I see in the last Report of the Corporation that in the course of the year it lent £12 million and that its administrative expenses were about 2 per cent. of that. I assume that the administrative expenses in collecting past loans are not very high, and therefore I wonder whether 1697 that percentage is too high, since the administrative expenses of the building societies are about ½ per cent. of the money lent. Perhaps the Corporation is still doing a great deal of promotional and other initial work which tends to send up the administrative expenses. An expansion of its business might tend to reduce that fairly high figure of 2 per cent., which might eventually be passed on to borrowers.
I am also concerned about the rate of interest. My hon. Friend should tell us the rate of interest paid for the money provided for the Corporation under the present tranche of £25 million, wherever it is obtainsd. It may be that it is being borrowed on the market and that a market rate has to be paid for it. But if my reading of the Government's estimates is correct, it is being raised by taxation, and therefore the £25 million lent to the Corporation is not costing the Government anything in interest. It may be that it is being borrowed elsewhere, and that a rate of 8 or 9 per cent. has to be paid for it. Where is the money raised initially, and does any interest have to be paid on it by the Government?
§ Mr. Dobson
Would it not also be opportune at this stage to raise the question of the Corporation's finances in the rather wider sphere? Why is it not possible for it to control its finances itself, and not have to rely on the Treasury or any other sources such as building societies to raise a portion of its funds?
§ Mr. Fraser
I am obliged to my hon. Friend for that intervention, with which I shall deal in the course of my speech.
I should like to know what rate of interest will be charged by the Housing Corporation in the future to its housing society borrowers. The hon. Member for Crosby said that there was a statutory obligation to charge one quarter per cent. above the building society rate. That is not so. There is no statutory obligation to do so under the Housing Act, 1964. By virtue of Section 1(2), the Minister can give a direction to the Housing Corporation, and has done so, regarding the various rates of interest. But there is nothing in the Act specifying that one quarter per cent. above the building society rate must be charged.
Now that the building society rate is 8½ per cent., will the Minister vary the 1698 past practice and issue a directive that the rate of interest to be charged by the Corporation on its loans should be less than, or at any rate not greater than, the rate being charged by the building societies? It is undoubtedly true that the more one raises the rate of interest the more difficult it is for people to form housing associations and to pay the rents demanded.
It is that much more difficult because co-ownership housing societies choose to have the mortgage option scheme, for administrative convenience. They can take advantage of Section 43 of the Finance Act 1963, which enables a housing society to apportion among its members the interest paid during the past year. Then each tenant-occupier can get the same relief as an individual who has a building society mortgage and chooses to have the interest on his mortgage set against his Income Tax. But it is administratively very difficult to do that, because it means making a large number of calculations each year, and the number of tenants tends to change from year to year.
The societies which have chosen the mortgage option scheme are now finding the relief worth rather less than that which would be available to tenant-occupiers paying tax at the standard rate. The real interest charge to an owner-occupier or a co-operative tenant who has elected to take tax relief and not be in the mortgage option scheme is £5 15s. 3d. per £100 borrowed in respect of the building society loan to the housing society. I suggest to my hon. Friend, for onward transmission to my right hon. Friend the Chancellor of the Exchequer, that the rate of allowance given should be a composite rate which may be varied from year to year.
The building society pays a composite rate of tax on borrowings from investors at 6s. 5d. per £. There is no reason why one should not vary from year to year the tax reliefs given to borrowers, including housing societies, so that they would in reality be paying at the moment only a rate of interest of 5¾ per cent. This would also save the Treasury an immense amount of money because it would avoid hundreds of thousands of claims being made to inspectors of taxes each year for income tax relief on building society interest.
1699 It would be possible to take one year with another and to have a regular and lower rate of interest paid by housing societies. In view of the hardship caused to housing societies, whether a scheme is to be successful is more than marginal, and I hope that my hon. Friend, even if he cannot say anything about it now, will have a word with the Chancellor of the Exchequer to see whether anything can be done on 15th April.
My next point concerns the sources of finance of the Housing Corporation. It is the practice of the Corporation to advance one-third of the development costs of a housing society and for the housing society to borrow two-thirds from a building society. There is no statutory provision for that. By virtue of Section 2(1) of the 1964 Act, there is nothing to prevent the Corporation from lending 100 per cent. of the cost of the housing society's development, but in practice it has been directed to provide only one-third of the finance, with building societies supplying two-thirds.
This leads to a great deal of difficulty because a housing society not only has to show the Corporation that its scheme is viable and to submit surveyors' reports, architect drawings, costings, etc., but also to go through the whole process all all over again with the building society. This doubles the amount of administrative work undertaken by the housing society.
Furthermore, building societies are not particularly interested in lending to housing societies, and for good reasons. If a building society lends to the individual owner-occupier, statistically the mortgage will be paid back in eight to nine years, and the money is then available for re-lending. If it is lent to the Housing Corporation, the building society will not get its money back for 40 years. The result is that only four building societies of any size are prepared to support the movement—the Abbey National, the Co-operative Permanent, the Halifax and the Woolwich Equitable. Many building societies have not lent any money under housing corporation schemes. I do not want to denigrate other societies, however, many of which are small and whose advances, therefore, are large in relation to turnover. But it is increasingly obvious, particularly when there is a mortgage 1700 scarcity, that the building societies do not want to tie up money for 40 years in co-operative housing schemes. They would prefer to lend to owner-occupiers because then the money is turning over.
The best way to solve the problem of duplication of submissions to the Housing Corporation and the building societies and to solve the problem of building societies being unwilling to advance money for 40 years, is to allow the Housing Corporation to borrow money collectively from the building society movement and to put it into one single consolidated fund and not to have fractions of advances to housing societies. Let the housing societies deal only with the Housing Corporation and let the Corporation deal only with building societies. It would then be possible to balance the surplus of one building society available for lending to the Corporation with the desire of another society perhaps ten years hence to withdraw some of its money. The fund would be attractive to building societies, would lessen the administrative expenses of housing societies and would make the Corporation's activities easier to undertake.
The Corporation should go further. Instead of relying solely on the Government for one-third of the advances and engineering two-thirds from building societies, it should be enabled to go to pension funds, to the market, and to issue short-term securities to make up the money that it wants to borrow. It should take a leaf out of the book of some Scandinavian organisations, particularly HSV of Sweden, which operates a building society movement for people who want to become co-operative tenants. The lesson of the building societies is that it is possible to borrow short and lend long. There is no reason why the Housing Corporation should not follow this precedent.
Even more important, by arranging investments by individuals as well as institutions, by widening the scope of its borrowing both from the Government and on the market, the Housing Corporation could demonstrate the relationship between saving and getting a home. This relationship between saving up and subscribing money to the Corporation—saving for one's home—and then going to get a home loan is important. It has lessons for the country as a whole 1701 in proving that there is a relationship between being housed—indeed, as with any other social benefits—and saving.
I want to deal with the question of land. Has there been any liaison between the Housing Corporation and the Land Commission? The Land Commission has power to pass on to housing societies concessionary Crownholds. It is well known that it is difficult to develop a housing society in the centre of a conurbation where land is extremely expensive, but there is one way of doing it. This is by the Land Commission exercising its powers to purchase land at below the market value—at a value less the levy—and then passing that land on to a housing society, making it available at less than the cost. No one would be able to do any profiteering out of it and it would be one way of cheapening the cost of land for housing purposes. What liaison is there between the Corporation and the Land Commission? Does the Commission propose to make any concessionary Crownholds available? What plans has the Housing Corporation in future for buying up land to make available for housing and thereby providing a sort of land bank, so that societies which found it difficult to get land would be able to draw upon the bank for land which would be readily available to them?
I agree with some of the criticisms of the hon. Member for Crosby about the operation of the district valuer. I do not want to denigrate district valuers. Many do a fine job. But there are occasions when they come in conflict. If a district valuer has been asked to frank the price of land by a housing society and the price is relatively high but probably about market value, and if he is dealing at the same time with a compulsory purchase order on land for the local authority on an adjoining site and in the interests of the local authority is asked to pay as little as possible, there can sometimes be conflict.
I see no reason why reputable valuers apart from district valuers should not be permitted to frank the price of land. Sometimes it is only a matter of £100 or so between getting a plot of land for a housing society and seeing it go to a private speculator who, a year later, sells it at 8 per cent. profit—or not even a speculator but someone able to take advantage 1702 of the annual rise in the price of land.
§ Mr. Graham Page
There have been occasions when, because the housing society has been delayed in purchasing, it has finally had to buy the developed property as a package deal and has had to pay very much more.
§ Mr. Fraser
I am aware of that situation. A little more flexibility in the market operation of the sale of land would help in these cases.
If I have been critical of any aspects of the Housing Corporation, it has not been because I am against the Corporation, but because I want to help it. As a Socialist, I believe that the development of co-ownership and co-operative housing represents a quiet revolution. It represents something which is part of the essence of Socialism—people owning and controlling their own destinies without the profit motive being operated. The development of housing societies with people being their own bosses and not in conflict with or fighting the market and where rents, because they are nonprofit rents, are taken out of the market mechanism represents an important element of Socialism with strong lessons for other parts of the economy.
I wish the Housing Corporation success, and I hope that it makes good use of the money which the House is to allow it to borrow. I hope that we shall receive promises from the Joint Parliamentary Secretary that it will produce in future much more than it has so far produced, very creditably, since 1966 when it was first established.
§ 7.21 p.m.
§ Sir Douglas Glover (Ormskirk)
The House has listened with interest to the hon. Member for Norwood (Mr. John Fraser), who speaks on this subject with great authority. I declare an interest in that I am chairman of a housing society and a member of the Council of the National Federation of Housing Associations. I suppose that I am now empowered to continue my speech without declaring any more interests.
I am an enthusiastic supporter of this movement. When my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph) introduced this scheme in 1964, he showed great imagination. He introduced a scheme which should have 1703 been developed far more than it has been developed in recent years. My criticism of the present Government, and it is a rather bitter criticism, is that this idea should have been pushed and enormously developed during the last five years, but, instead, it has gone at a slow penny-farthing bicycle speed, and even now its activities are contracting.
This is not a matter of Socialism—I did not agree with the final remarks of the hon. Member for Norwood. We are here dealing with a serious problem, and the nation might as well realise it. I do not apportion any blame, because the problem goes back to 1918, but, because of the rent control policies which have existed for all that time, there has not been and there is not likely to be any private property to let at other than usurious prices. Private property will not be built which the great mass of the population can afford to rent. As a result of these policies, there are now about one million fewer units of accommodation for letting, apart from local authority housing, than there were 10 or 15 years ago.
This has reduced the nation's mobility. I am a great believer in owner-occupation and I should not like anything I say to be thought to diminish my support for those who wish to buy their own houses. But if we want a mobile society to man the new industries which are growing up and to help people to take jobs for their advancement, there must be rental accommodation which they can get without having to go on a local authority housing list for 10 or 15 years.
For example, a man working at Fords at Dagenham may be offered promotion which means having to go to Halewood. He may have to go only temporarily, but not know whether he will be there for 12 months or two years—he may be on trial. There is a long waiting list for council houses in Liverpool, and so he will not get a corporation house and he will probably settle for one room. That means that he cannot take his wife and children with him. He will return to Dagenham and tell the Ford management that he will not take promotion. That is the result of the lack of accommodation to cope with mobility.
I hope that my hon. Friend the Member for Crosby (Mr. Graham Page) will 1704 be seized of what I am saying when I say that I should like 10 per cent. of all the houses built in the country, that is about 40,000 a year, to be built under one of these schemes. Without that, the population will be static and there will not be that movement which is needed in a viable society. But if that is to happen, the Government of the day will have to be much more dynamic about this problem than has been the case so far.
I will not go into this at any great length, but many of the things said by the hon. Member for Norwood I said, funnily enough at a Housing Corporation conference at Liverpool when the housing associations were called together. I put it slightly differently. I said that if the building societies were not prepared to find the funds for the housing associations, the Housing Corporation and the housing societies jointly had better start their own building society. I see no reason why they should not do so. Such a society would be backed by a great number of sound well-built properties, so the assets would be there. It would be able to appeal to the public for funds and to use the other methods of raising finance which the hon. Gentleman mentioned. Such a society could then be quickly got off the ground to provide the finance for building 30,000 to 40,000 units of accommodation every year, and that would result in a dramatic alteration of the present position.
But it would need action from the Government. The Housing Corporation is not as old as all that—it has been established only in recent years—and I get the feeling that it moves cautiously and is frightened to take firm decisions. My experience and that of my professional colleagues in the housing association of which I am chairman is that it is difficult to get a firm decision out of the Corporation and the Corporation sometimes finds it difficult to get a firm decision out of the Government, so that it is not altogether the Corporation's fault.
But the whole business is very long drawn out and I am sure that it could be speeded up if it were appreciated that housing associations are almost all professional organisations in the provision of cost-rent co-ownership accommodation. I get the feeling that we are 1705 regarded as a lot of old-age pensioners building a few old people's homes on a sort of charitable basis.
We are even sent directives as to when to put up a sign saying that property is available to rent. Surely our professional advisers can judge the right moment. If it is done too early, there is a queue of people who want the accommodation and who are told provisionally that they may rent it as from, say, 1st April, 1969. But if on 1st April, 1969, the work is not finished and the would-be tenants have given notice somewhere else, they are in a mess. The Corporation wants much more freedom of action from the Government and the associations want much more freedom of action from the Corporation. We are here dealing with what are generally ably commercially managed organisations.
I do not wholly agree with my hon. Friend the Member for Crosby about amalgamations. I believe that, as with the building societies, as the housing association movement develops, amalgamations will be inevitable. I am sure that the hon. Member for Norwood with his experience will agree. Once plans for blocks of houses, flats, or flatlets, get off the ground the management of the property becomes a serious problem. A minimum size of society becomes desirable if the blocks are to be properly run and serviced, if the drains are to be kept in order and the decorations are to be done and so on. That cannot be done if there is only one block of flats in which everyone has lost interest by the time it is completed.
I am very worried about the co-ownership element in cost-rent houses. I would not mind if it was genuine co-ownership, but we must be blunt about it; it is really a bit of a fiddle by the Minister of Housing to get round the option mortgage. The right answer is for the Government to give the option mortgage to the cost-rent schemes just as much as co-ownership. Anyone who is a lawyer, and thank Heavens I am not, will say that the legal position with the co-ownership business, and the changes of ownership that will go on, has by no means been worked out. It will be a very complicated business.
The bulk of the people moving into those co-ownership units are not 1706 genuinely buying a house or flat. They are people who, except for the option mortgage, would have gone into a cost-rent unit. It might be a school teacher, who gets a job in Liverpool or Leeds and wants accommodation. He may be at the school for two years, seeks promotion and then goes somewhere else. He does not want the bother of buying a property, and because of the option mortgage, he goes into this co-ownership business. It is not a genuine co-ownership purchase of property. Such people are living in rented property, because under the co-ownership scheme, with the option mortgage, the rent is lower than it would be with the cost-rent scheme.
§ Mr. Peter M. Jackson (The High Peak)
Would the hon. Gentleman acknowledge that there are schemes made up of members who are at a disadvantage, and are required to opt for the option mortgage scheme? I am acquainted with such a scheme, where every member would, if he had a free choice, not opt for the option mortgage at all, because his income is at such a level that he is gaining no advantage from it.
§ Sir D. Glover
I entirely accept that. I do not want to detain the House too long on this, in fact I must apologise to the Joint Parliamentary Secretary because I shall not be able to stay to listen to his reply—I have another appointment.
§ Mr. MacColl
Before the hon. Gentleman goes, may I say that I was sorry that he suggested that people who were going to Halewood would want to live in Liverpool. I was about to suggest, declaring my own interest in this matter, that any wise and sane person would live in the Widnes division.
§ Sir D. Glover
I accept that rebuke from the Joint Parliamentary Secretary. He must realise that in the House a lot of people do not know the desirabilities and beauties of Widnes. I was using the word "Liverpool" intending it to include Widnes. All I was saying was that if a person could find a cost-rent or co-ownership unit, he would take the promotion. I agree with what the hon. Member for Norwood said that in a co-ownership scheme, where it operates under the 1963 Act and gets a lower rent because of the taxation structure, then it is a very good thing to do. But the 1707 complications of co-ownership will develop as the years go by, and the right answer for the State, and here I am being very neutral, is for it to get this ironed out on a cost-rent basis to that it would apply to either side. Basically, such people are mobile people who want to move about the place.
We have had to learn by experience. This year we shall have about 250 units, which is quite substantial. We have learned a great deal. Although I have declared an interest, I should add that I am the only person who never seems to get anything. I am the chairman, and I do not even get paid my expenses. I am asked to pay £5 to become a member, and Lord knows when I will get that back! My society now has 250 units, and if the growth takes place, as I would like to see, then I presume that by about the end of 1975 the society ought to be controlling 1,000 units. It will be a very powerful property owner.
By that time I will probably not be the chairman, but in these societies where there are professional people, it is a good thing to have someone who is not a professional as a chairman of the board. However, it cannot be expected that the chairman will go on being unpaid for ever. Even the most worthy person is worthy of his hire, and this is in a way sweated labour. I must say that when I was asked to become the chairman I thought that it would be very easy. I find that I am the father confessor of the whole organisation, and it is always wanting me to go to Liverpool to sort things out. Every time I go I cannot even charge the petrol. It is all out of my own pocket.
The Minister ought to look into this, because it will have to be investigated, for the health of the movement. I have no doubt that building societies started through worthy people in a district banding together in a small group. I do not suppose that one of them ever drew a penny, but now they are great financial organisations. I will not say some of the most lucrative, but some of the most substantial jobs in commerce and industry are connected with the building societies. We have to accept that this sort of thing is bound to develop here.
There is also the question of land, and here I agree with what the hon. Member 1708 for Norwood said. We have a case where the district valuer took a long time. I am not blaming him or his office, because they do very well. He took quite a long time before we got the figures. It was less than the owners were prepared to sell for, so we were not able to buy, and someone else bought it. About 18 months later we bought it from the other people and the building corporation and everyone else was worse off as a result. We are knowledgeable people, we are just as well able to make our decisions in this as anyone else. We assess what rentals we can charge, what sort of units we can put on a site, what the traffic will bear. If we know that it will bear so much, then we know that we can pay so much for the land and make a go of it on a cost-rent basis.
The Department has to involve a scheme whereby we can have more freedom of action. At this Liverpool conference my suggestion met with a great deal of support. I am quite prepared to accept that there may have to be a first and second division for housing societies, whereby a society might have to pass a "driving test"—would have to be established for so long and have so many units, a record of success, before being allowed to "drive on the road" without supervision. Until then there would have to be someone to see that they were doing correctly. The Housing Corporation said that it was trying to evolve this scheme. Will the Minister encourage it to do so more quickly? This is very relevant and it will keep expense down.
I do not think that this organisation, which is beginning to slow down, will get very far—and here I am putting a challenge to my hon. Friend the Member for Crosby—until the Government of the day say publicly that their target is that by 1975 this type of organisation will be building 25,000 or 30,000 units a year. If a housing target is not laid down, we shall not get very far. It is a spur and a guide. The Government can begin to work out their finances. They can decide whether the proposals of the hon. Member for Norwood would have to be sucked in to raise the finance.
I do not think that we can jolly a scheme along on the basis "We shall build what we build, and hope that next year it will be a bit more." The State 1709 must decide that this type of housing scheme has an important and vital role to play in the housing structure and to say that the aim is in eight years to get up to 10 per cent. of the total volume of houses built in any one year built in this way. If this pattern were established, more able people would perhaps be encouraged to take part in these schemes. The question of the financial structure would become much more vivid in people's minds and action would have to be taken. Then we would get something which is very dear to my heart, namely, a group of modern, well-built units of accommodation for a mobile, vital economic society. If the Government would do this, or the Conservative Party when it returns to office, our successors will think that we had done something very useful to make Britain a more efficient and better place to live in.
§ 7.42 p.m.
§ Mr. R. F. H. Dobson (Bristol, North-East)
I never thought that I would share an experience with the hon. Member for Ormskirk (Sir D. Glover), but I do. I, too, am an unpaid, acting-for-nothing chairman of a housing society. I should, however, make one distinction, and that is that I am more of a learner than the hon. Gentleman.
This has been an interesting debate because reference has been made to almost identical problems arising in different parts of the country. I hope that this shows my hon. Friend the Joint Parliamentary Secretary to the Ministry of Housing and Local Government that there are two or three basic problems which he should consider and about which he should do something. Something which is not exactly in my hon. Friend's court but which is certainly in his Ministry's court is the common problem of district valuer delays. I do not criticise individual valuers or officers because at times they make a particular effort to meet commitments if they are pushed to do so. This is to be welcomed. They work under extreme difficulty and heavy pressure, particularly in the last year or so, which has made this a slow and cumbersome process.
I am not keen about using private valuers, if that is the right phrase. With schemes such as those which exist, I do not know that we could rely absolutely on private valuations, although I accept 1710 that the chances are that somebody working in the district will arrive at a figure close to that of the district valuer.
§ Mr. John Fraser
Would my hon. Friend concede that this is what the building societies do? They rely on their private valuers.
§ Mr. Dobson
I concede that readily. But here we are dealing with a certain amount of private funds, which is why the district valuer was suggested when the Act was introduced. The financial structure in housing should be overhauled. It then becomes clearer that one has to use a district valuer rather than a private valuer.
Another common thing is the abortive work of some of the professionals who serve on the society. They do a lot of physical abortive work in looking for sites, producing plans for sites which do not materialise, and arguing with local authorities, perhaps in some cases with building societies and in others with owners of land, in trying to get schemes accepted. It is true that they are paid for their professional services, but they are paid for professional services which click. Many jobs which they take on for societies fail to mature and they get nothing for them. Great credit is due to them for the wide range of work which they do for which they get no recompense or reward other than that which they get out of a desire to supply houses.
I wish to refer to the question of management problems. In the South-West area a report has been presented to the housing corporation specifying the problems which beset the management of the various societies. I do not claim that it is a very deep study or a study which deals with every problem, but unless I miss my guess it has had a very good stab at the general problems which housing societies face. I hope that the Housing Corporation will take up this matter in consultation with the Joint Parliamentary Secretary or somebody else from the Ministry and ensure that this information, if information it is, and expertise and help is available not only to that area but to all societies on request if this report merits that treatment, as I believe it does.
I wish to make two other points. One concerns finance. What my hon. Friend 1711 the Member for Norwood said generally makes sense. We cannot go on for much longer relying on one-third of the money coming from the Housing Corporation and two-thirds from building societies. As soon as there is any problem concerning the supply of money through the building societies, that source dries up. All the building societies are known to the housing societies. Nevertheless, if they have to make choices the last choice in many cases is the housing society. As soon as there is a drying up of building society resources, housing society schemes do not come to fruition. Therefore, the suggestion of my hon. Friend, to which I was attracted, should be considered.
I hope that my hon. Friend the Joint Parliamentary Secretary will consider whether the Housing Corporation should be re-funded so that it deals completely with its own finance. This might be a difficult job to start with, but it is worth looking at. There are only two alternatives. The present scheme means that we totter from one crisis to another in the Finance Bill with no result.
A point which has been raised frequently in the debate is why the targets for the number of units have recently dropped. Why have not the Housing Corporation's schemes and figures moved in an upward direction? There has clearly been a fall-back in the number of units and schemes. This is a pity and is depressing for those who are working in housing societies and in the Housing Corporation. We should try to avoid stagnation. The hon. Member for Ormskirk mentioned target figures. I think it would be valuable to have targets, which would stimulate all those who are working towards providing houses of this sort.
§ 7.51 p.m.
§ The Joint Parliamentary Secretary to the Ministry of Housing and Local Government (Mr. James MacColl)
This has been a short debate participated in by few hon. Members, but it has shown one of the great values of the House of Commons in discussing a subject which is so specialised and abstruse. I and my Ministry have had a battering from hon. Members of widely differing political views with widely differing approaches to the problem. But all those who concerned 1712 themselves with this subject knew what they were talking about, and the cumulative effect of what they said is of great value.
I express appreciation to those running the Housing Corporation. Some of the criticisms which have been made of them have not been well founded. They have a difficult job to do. The Board of the Corporation is a strong Board and its members are widely experienced and are in a position to talk with authority about what they are doing. They do not always agree with the Government, and the Government do not always agree with them—it would be very odd if they did—but we all recognise that we are trying to do the same job. Each individual housing society consists of people who devote themselves to this work and who, as a result, develop very strong views on what they think should be done, in the same way as the hon. Member for Ormskirk (Sir D. Glover). That is right and I do not quarrel with it.
The debate has revealed a fundamental difference of approach to the problem of what the housing societies are trying to do, and of what kind of control ought to be imposed upon them. My hon. Friend the Member for Norwood (Mr. John Fraser) saw housing societies as being Socialist in conception. He thought that co-ownership was a good, democratic, Socialist method of providing houses and should be regarded as an essential part of the public sector so that public money increasingly took over responsibility. He and my hon. Friend the Member for Bristol, North-East (Mr. Dobson) were impatient with the two-thirds and one-third proportion. They thought that there should be increasing public responsibility and increasing use of public resources.
On the other hand, the hon. Member for Crosby (Mr. Graham Page) said that he regarded housing societies as doing a normal commercial transaction for the provision of middle-class dwellings. I am not making a debating point and playing one off against the other. This is the dilemma which we must face.
If we are regarding this as a normal commercial transaction for people who can be expected to pay their own way and who do not want and would not expect a public subsidy, then public participation 1713 in the financing of the body should be minimal. It should be just a pump-priming job. If, on the other hand, it is to be regarded as comparable with a housing association, which has authorised arangements with local authorities, or with the provision of council houses, then it must come within public sector investment and be looked at from the point of view of what can be afforded in the way of investment in the public sector.
My hon. Friend the Member for Bristol, North-East gave this as a ground for giving them independence. He said that we should not be tottering from financial crisis to financial crisis. We all agree with this, but the whole point of his argument about the Government's policy in this matter and in other matters is that unless we control public investment, unless we limit it rigidly, unless we are clear in our minds on how it should be allocated, then we shall totter from financial crisis to financial crisis. If we want to use the Housing Corporation to maximum effectiveness we must achieve greater private participation through building societies and other bodies in the provision of cost-rent and co-ownership houses for the minimum expenditure of public money.
I was asked whether there was joint operation with the Land Commission for the use of Crownhold land as a land bank. There is nothing to prevent the Corporation from being in close touch with the Land Commission; it is quite free to do so. It is a matter for those bodies to work out how they can best work together in partnership. The Housing Corporation was set up primarily to supervise the lending of public money, to see that it was used economically and to exercise strict control over the manner in which it was used.
The views of the House on the district valuer are most valuable. The district valuer is the custodian of public economy and the use of public funds and he therefore has his responsibilities. I will draw the attention of my right hon. Friend to this point.
There have been two main charges against the Government. The first is that they are keeping down the amount of money advanced to between £8 million and £9 million a year. This is not a limit on the number of houses but on 1714 the amount of money which is available. That means that if the Corporation can get more than the two-thirds from outside sources, they will be able to provide more houses. I am sure that, when my hon. Friends think about this carefully, they will see the point. We cannot have a tough policy on keeping down loans and keeping down investment in the public sector and other sections of housing while saying at the same time that we shall give a blank cheque to the Housing Corporation to draw all the money that it wants. That is a straightforward way of getting into a financial crisis, and it is not just.
The second point made referred to the ceiling of £5,000 a unit, although nothing beyond that was forbidden, provided that it had my right hon. Friend's approval. In fact, the figures are £5,000 in the provinces, £6,000 in the South-East Planning Area, and £7,000 in Greater London. My right hon. Friend felt bound to place this ceiling on the activities of the Corporation because of the feeling that the object of the Corporation in the use of that very scarce commodity, public investment, was not to make advances for purposes which could find the necessary finance elsewhere. The object was to provide accommodation at moderate and reasonable rents, rather than expensive luxury property for which there was already a fairly easy market and for which there were other means of providing the necessary finance. If one is doing a commercial job in providing middle-class dwellings for middle-class people, normally they should be able to pay the cost. When one is seeking finance above a certain level, the question arises whether it is proper to use Housing Corporation funds for it. I have seen some cases in which I thought that there could be no argument for using public money in this way.
If, as we have been told, it is so important to keep down rents, we must also keep down costs. It is no use allowing a housing society to buy expensive land in the middle of a high-rent area in order to build accommodation if the resulting rents are beyond the purses of those for whom it is intended. Some regard must be had to the rent and, therefore, it is very important not to allow the developments which are taking place to get out of reasonable balance.
§ Mr. Graham Page
Before the hon. Gentleman leaves the subject of restrictions on finance, may I ask whether it is necessary to restrict the finance to £8 or £9 million a year for a period of three years? It gives the impression that there is some permanent policy towards the Housing Corporation to restrict its activities. A restriction for one year in a time of crisis would be sufficient, and it would be more encouraging to the Corporation if it felt that it was a matter only of a temporary restriction on its powers rather than a permanent restriction.
§ Mr. MacColl
I think that we should take a realistic view. It is only fair to give the Corporation some idea of the kind of scale upon which it can reasonably hope to operate.
A number of constructive and in some cases conflicting points have been advanced about whether we should concentrate on co-ownership or on cost rents, whether we should have large societies or small societies, and whether, as the hon. Member for Ormskirk said, 10 per cent. of building should be kept for housing societies.
All these are difficult problems, and I am in no sense bringing a rabbit out of a hat. My right hon. Friend regards them as being real problems, and he is very much aware of them. He is far from being complacent. That is why he asked the Central Housing Advisory Committee to set up the Cohen Committee, under the chairmanship of Sir Karl Cohen and with the great advantage of having as one of its members the hon. Member for North-ants, South (Mr. Arthur Jones). It is receiving an enormous amount of evidence from the Federation, the Corporation, and other societies, associations, and local authorities with a view to answering these questions and to giving us guidance about them. The Committee is involved in a tremendous job of distilling the wide variety of views advanced. If, as a result, there come clear recommendations, it will be of great help to the Government in deciding future policy.
§ Question put and agreed to.
That the Housing Corporation Advances (Increase of Limit) Order, 1969, a draft of which was laid before this House on 3rd March, be approved.